BILL ANALYSIS


                                                        H.B. 1877
                                             By: Stiles (Sponsor)
                                                          Finance
                                                         05-05-95
                              Senate Committee Report (Unamended)
BACKGROUND

Virtually all public institutions of higher education have
statutory language allowing the board of regents of the particular
institution to delegate certain powers and duties of the board to
committees, officers, or employees of the board.  The statute of
the board of regents of the University of Texas System has been
interpreted as not allowing delegatory powers granted to other
governing boards.

PURPOSE

As proposed, H.B. 1877 grants delegatory powers to the board of
regents of the University of Texas System.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is granted
under SECTIONS 1 (Sec. 65.31(g), Education Code) and 2 (Sec.
65.34(a), Education Code) of this bill.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 65.31, Education Code, by adding
Subsection (g), to authorize the board of regents (board) of the
University of Texas System (system), by rule, to delegate a power
or duty of the board to a committee, officer, employee, or other
agent of the board.

SECTION 2. Amends Section 64.34, Education Code, to require a
contract to be approved by the board or otherwise entered into in
accordance with rules of the board relating to contracting
authority.  

SECTION 3. Amends Section 66.08, Education Code, as follows:

     Sec.  66.08.  New heading:  INVESTMENT MANAGEMENT.  (a) 
     Authorizes the board to delegate investment authority and
     contract for the investment of the permanent university fund
     to the same extent as the governing board of an institution of
     higher education with respect to an institutional fund under
     Chapter 163, Property Code.
     
     (b)  Authorizes the board to enter into a contract with a
       nonprofit corporation for the corporation to invest funds
       under the control and management of the board, including the
       permanent university fund, as designated by the board. 
       Prohibits the corporation from engaging in any business
       other than investing funds designated by the board under the
       contract.
       
       (c)  Requires the board to approve the articles of
       incorporation and bylaws of the corporation and any
       amendment to the articles of incorporation or bylaws;
       investment policies of the corporation, including changes to
       those policies; audit and ethics committee of the
       corporation; and code of ethics of the corporation.
       
       (d)  Requires the board of directors of the corporation to
       have nine members.  Requires the board to appoint and remove
       all members of the board of directors of the corporation. 
       Requires at least three members of the board and the
       chancellor of the system to be appointed as directors.
       
       (e)  Requires the board to select one or more of the members
       of the board of directors of the corporation from a list of
       candidates with substantial background and expertise in
       investments that is submitted to the board by the board of
       the Texas A&M University System.  
       
       (f)  Requires the board to provide for an annual financial
       audit of the permanent university fund if an investment
       contract entered into under Subsection (b) includes the
       permanent university fund within the scope of funds under
       the control and management of the board to be invested by
       the corporation.  Requires the audit to be performed by the
       auditors of the system and the Texas A&M University System
       and presented to the board.
       
       (g)  Requires the corporation to file quarterly reports with
       the board concerning matters required by the board.
       
       (h)  Subjects the corporation to the Texas Non-Profit
       Corporation Act.
       
       (i)  Prohibits the corporation from entering into an
       agreement or transaction with certain persons or entities.
       
       (j)  Provides that an agreement or transaction entered into
       in violation of Subsection (i) is void.
       
       (k)  Sets forth criteria for a person who has an interest in
       a business entity.
       
       (l)  Defines "board," "governing board," "institutional
       fund," "and institution of higher education."
     SECTION 4.     Requires the board of the system to retain an
independent accounting firm to perform a financial audit of the
permanent university fund before implementing the first contract
entered into by it that includes the permanent university fund
within the scope of funds under the management and control of the
board to be invested by a corporation pursuant to the authority
granted by Section 66.08, Education Code, as amended by this Act.

SECTION 5. Provides that the invalidity does not affect other
provisions or applications of this Act that can be given effect
without the invalid provision or application, and to this end the
provisions of this Act are declared severable if the provision of
this Act or its application to any circumstances is held invalid.

SECTION 6. Emergency clause.
           Effective date:  upon passage.